Pat McKeough

A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.

As early as 1980, Pat was recognized as #1 in the world of published investment advice by the Washington, DC–based Newsletter Publishers Association, and he was the first multi-year winner of The Globe and Mail’s stock picking contest.

Both CBS MarketWatch and The Hulbert Financial Digest recognized Pat as one of North America’s top stock analysts. The Wall Street Journal called him “one of only four investment newsletter advisors who have managed to serve their readers well over the long haul.”

A best-selling Canadian author, he wrote Riding the Bull, his 1993 book that predicted the stock-market boom of the last half of that decade. Through his many television appearances, he is well-known to investors for his insightful analysis and his candid, unpretentious style.

Bottom line: Pat’s conservative, reduced-risk strategy is a proven approach to safe investing.

Posts by the author
TFSA showdown: penny stocks vs blue-chip dividends. Compare risk, tax, liquidity, and compounding so Canadians can choose safely.
ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $48 and ACO.Y [class II voting] $48; Income Portfolio, Utilities sector; Shares outstanding: 115.3 million; Market cap: $5.5 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.atco.com) holds 53.2% of Canadian Utilities (see page 85). It also owns 75.5% of ATCO Structures & Logistics, which builds temporary buildings for construction and energyexploration firms; Canadian Utilities owns the remaining 24.5%.

The company recently agreed to sell its information technology subsidiaries in Canada and Australia. These businesses provide computer support, billing, payment processing and related services to ATCO’s other subsidiaries, as well as outside clients.

The buyer, Wipro Ltd., will pay $210 million when the sale closes later this year. In addition, Wipro will provide computer support and related services to ATCO under a new 10-year contract.

...
BCE INC. $48 (Toronto symbol BCE; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 778.3 million; Market cap: $37.4 billion; Price-to-sales ratio: 1.8; Dividend yield: 5.1%; TSINetwork Rating: Above Average; www.bce.ca) has agreed to pay $3.95 billion in cash and stock for the 56% of BELL ALIANT INC. $31 (Toronto symbol BA; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 227.8 million; Market cap: $7.1 billion; Price-to-sales ratio: 2.6; Dividend yield: 6.1%; TSINetwork Rating: Average; www.bellaliant.ca) that it doesn’t already own.

Bell Aliant investors have three options: $31.00 in cash; 0.6371 of a BCE share; or $7.75 in cash plus 0.4778 of a BCE share. BCE will cap the cash portion at 25% of the total payout.

We recommend the all-stock option. That way, you can defer capital gains taxes on the BCE shares you get. However, if adding more shares would push up your BCE holdings to more than, say, 10% of your portfolio, you should select the all-cash option.

...
HOME CAPITAL GROUP INC. $55 (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 70.1 million; Market cap; $3.9 billion; Price-to-sales ratio: 4.0; Dividend yield: 1.3%; TSINetwork Rating: Average; www. homecapital.com) gets 90% of its revenue by offering mortgages to borrowers who don’t meet the stricter standards of larger, traditional lenders, like banks. Clients include self-employed people and recent immigrants with limited credit histories.

The remaining 10% of its revenue mainly comes from credit cards and other loans to consumers and businesses.

Today’s low interest rates continue to fuel strong real estate sales, particularly in cities like Toronto and Vancouver. However, a rate increase would undoubtedly slow sales—and mortgage demand. A sudden drop in home prices could also force some borrowers to stop repaying their loans.

...
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ GREAT-WEST LIFECO INC. $32 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 998.9 million; Market cap: $32.0 billion; Price-to-sales ratio: 1.1; Dividend Yield: 3.8%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s secondlargest insurance company after Manulife Financial (Toronto symbol MFC). It also offers mutual funds, retirement planning and wealth management. Power Financial (Toronto symbol PWF) owns 67.0% of Great-West.

As of June 30, 2014, the company had $804.6 billion of assets under administration, up 6.1% from the start of the year.

...
MANITOBA TELECOM $30.63 (Toronto symbol MBT; Shares outstanding: 77.4 million; Market cap: $2.4 billion; TSINetwork Rating: Average; Dividend yield: 5.6%; www.mts.ca) jumped to just over $33 in response to BCE’s plan to buy 100% of Bell Aliant (see box on page 57). Investors believed Manitoba Telecom could also become a takeover target.

However, as part of the company’s 1997 privatization, the Manitoba government limits any single shareholder’s ownership to 20%. The shares have since moved down to where they were before BCE’s announcement.

Manitoba Telecom is still a hold.

...
TORSTAR $7.59 (Toronto symbol TS.B; Shares outstanding: 79.9 million; Market cap: $608.2 million; TSINetwork Rating: Average; Dividend yield: 6.9%; www.torstar.com) reports that in the quarter ended June 30, 2014, revenue fell 7.4%, to $225.6 million from $243.6 million. Earnings per share fell 4.8%, to $0.20 from $0.21.

Torstar is still deciding what to do with the $455 million in cash from the sale of its Harlequin book-publishing subsidiary.

The company will use some of the funds to pay down its $180.8-million debt. But with sales and earnings still weakening as the slow economy hurts advertising revenue at its newspapers, it’s unlikely to reinvest much of the remaining cash in its newspaper operations. Instead, Torstar will probably focus on businesses with more growth potential, including web sites it owns, or perhaps new acquisitions.

...
GEORGE WESTON LTD. $87.68 (Toronto symbol WN; Shares outstanding: 128.1 million; Market cap: $11.2 billion; TSINetwork Rating: Above Average; Dividend yield: 1.9%) makes a number of products through Weston Foods. Its businesses include fresh and frozen bakery and cookie operations in Canada and facilities that make frozen bakery items, biscuits, cookies, cones and wafers in the U.S. Weston also owns 46% of Loblaw (see left).

In the quarter ended June 14, 2014, Weston’s revenue rose 36.0%, to $10.6 billion from $7.8 billion a year earlier. Excluding Shoppers Drug Mart’s contribution to Loblaw’s sales, Weston’s revenue rose 2.5%.

Without one-time items, earnings per share gained 16.7%, to $1.26 from $1.08. A bigger contribution from Loblaw offset weaker results at Weston Foods due to higher commodity prices and plant start-up costs.

...
LOBLAW COMPANIES $53.05 (Toronto symbol L; Shares outstanding: 413.9 million; Market cap: $21.9 billion; TSINetwork Rating: Above Average; Dividend yield: 1.9%; www.loblaw.ca) is Canada’s largest food retailer, with about 1,200 stores. Its banners include Loblaws, Provigo, Fortinos, Real Canadian Superstore and No Frills.

In March 2014, the company completed the acquisition of the 1,250-store Shoppers Drug Mart chain. Loblaw paid $12.3 billion; $6.6 billion in cash and $5.7 billion in Loblaw common shares.

Loblaw’s parent company, George Weston Ltd. (see below), helped it pay for Shoppers by purchasing $500 million of new Loblaw shares. Due to the extra shares outstanding, Weston now owns 46% of Loblaw, down from 63% before the acquisition.

...
ENBRIDGE INC. $53.46 (Toronto symbol ENB; Shares outstanding: 834.8 million; Market cap: $45.2 billion; TSINetwork Rating: Above Average; Dividendyield: 2.6%; www.enbridge.com) recently won Ottawa’s approval for its Northern Gateway pipeline.

The project faces strong opposition from environmentalists and First Nations. As well, the Supreme Court recently issued a ruling that makes it easier for aboriginal groups to claim title to their traditional lands.

However, Enbridge does not expect the ruling to block Northern Gateway. There are no land claims along the pipeline’s route, and the company has signed equity-sharing deals with 26 First Nations.

...